Kevin Reddy has a reason to like social media. It’s because of those data points that the chairman, president and CEO of Noodles & Co., a fast-casual lunch and dinner restaurant chain, decided he had to bring the chain to Pittsburgh.
The Colorado-based company has more than 5,200 employees and more than 280 restaurants in 22 states. Two of its newest locations are Market Square and Oakland.
“One of the wonderful things about social media is the amount of data points and guest feedback that you get,” Reddy says. “That’s one of the reasons why we decided we needed to get to Pittsburgh because we’ve gotten quite a few requests over the years about opening in Pittsburgh. It got to the point where we couldn’t ignore it; we’ve got to go.”
In an industry that has seen a decline in restaurants for the past three years, Noodles & Co. has been seeing double-digit growth.
Smart Business spoke to Reddy about what makes the Noodles concept so successful.
Execute growth plans.
For any business to grow successfully today, you’ve got to be one of the better, stronger performers within your niche and within your segment. One thing that we’ve been successful at is we have a pretty simple, focused philosophy on creating a dining experience that we’re really proud of and it’s based on three things; really good food, served by genuine, nice people, in a friendly, welcoming place. That’s what we’ve been doing over the past five years and we just keep getting better and better and better at it.
It starts with being very objective and critical about what you’re currently doing well today and what you’re not doing well today and really understanding how the guests view the brand. It’s one thing if a management team believes something but if the guests believe something else, you’re never going to create that connection that you need to. You have to be very objective and truly understand your guest’s perception of your brand. You’ve got to be very honest and objective of what your system is capable of executing and how well they’re doing it. Once you assess that you can put the right strategy together and form the whole discipline around identifying what’s important, being rigorous in how you innovate, and having a slightly unreasonable expectation in execution.
Grow your infrastructure.
Infrastructure for growth starts with understanding the right risk tolerance level. It’s about funding, it’s about capital, it’s about expectations around growth and you’ve got to believe in your own brand to grow. For anyone to grow, you first have to look at real estate. You really need to understand who your guest is, what influences how far they’re willing to travel and how frequently they come. You’ve got to be able to define those areas that make up the key decision criteria. Understand those big blocks of demographics and how they influence sales within the range of your own concept. Then it’s how do you replicate it. When you’re growing fast, you have to have the analytical model down pretty tight, and then you’ve got to have the discipline to stay true to your site screen.
Enter new markets.
Every year we add two to three brand-new markets. We pick those based on what we can get on data. We try to find out which cities and states are thriving and growing and which are struggling. We picked Pittsburgh because Pittsburgh has done a phenomenal job in staying relevant and transitioning its economy.
You have to really understand the elements of your business and which ones are critical to replicating success because not all things are important equally. You have to look at what’s on the consumer side, on the operation side and then the real estate side. You have to willing to build those systems — the training programs and decision logic before you start growing. You’re always going to modify and get better, but it gets really difficult to build the ship as you’re sailing it and you don’t want to make fatal mistakes early on. What’s critical to the right real estate? How are you going to merchandise and market the guests? How are you going to make the brand relevant and make people aware of it so they’re going to try you? You can’t just chase a number for growth. You have to pay attention to every one of those details because they all have a chance to dilute your ultimate success.
HOW TO REACH: Noodles & Co., (412) 562-2191 or www.noodles.com
Vlad Shmunis built his company the old-fashioned way, one customer at a time. Starting with zero users, he’s grown RingCentral Inc. to deliver cloud-based business phone system solutions to more than 200,000 customers across three continents and employs approximately 500 people.
“It’s very clear that there is an amazing amount of demand,” says Shmunis, the founder and CEO of the San Mateo-based company. “It was at the right time, right place. So it’s just trying to hit it on all cylinders.”
To stay ahead of the competition in the business communications industry, Shmunis now looks to invest in areas that grow the business with new customers while also meeting the needs of current ones.
Smart Business spoke with Shmunis about how he invests in RingCentral’s long-term growth.
Invest in top performers.
As we’re growing, the focus is more the sense of the overall vision and culture understanding and making sure that everybody is on the same page. As far as the people we want to hire, how do we incentivize them? How do we keep them excited about what they do?
This is a constant quest. We try to have an A-team in every respect. We have well-accomplished people in the key positions. So that’s taking a lot of my time now and probably will continue for the foreseeable future as the company grows.
The slowing down of the economy did not slow our growth down and did not slow our customers’. The people that work for us have options. So how do we keep them here and productive?
Invest in infrastructure.
People understand that emphasis is on continuing to delight existing customers. So we’re not going to do anything that would jeopardize their well-being and in any way destabilize the service. We do invest a lot into the infrastructure, so we’re definitely putting our money where our mouth is. We’re running our own cloud. We invest a lot in the support systems — software and people most importantly — making sure that you have 24/7 coverage … that people will be woken up in the middle of the night whenever something serious happens.
These are people trusting us with their businesses, and if their phone line goes dead, it’s not a good thing. If things do happen, which is hopefully not a very common occurrence at this point, we have procedures that are well-defined.
Time of response is extremely important. So if there’s an outage, we will immediately post updates to the website to keep them up to speed. We are active in social media so we use Twitter. We use Facebook, our own website, anything we can to make sure that we’re not asleep at the wheel and that we’re still here and the service will be brought up as soon as humanly possible.
Invest in quality.
We make it easy for people to refer people to the service. But really the most important thing is that we’ve invested heavily into a product that will be liked. You can’t pay a person enough to have them recommend something that the person doesn’t like. The product speaks for itself. So we just make sure that it does what it’s supposed to. It does it well. It does it reliably, which is immensely important for our customer base. The rest takes care of itself.
The general position is saying, ‘Look, while we’d really to grow and take over the world and have tens of millions of customers, none of that is going to happen unless we keep our existing customers happy.’ One positive reference may bring you another lead. One negative reference can lose you 10 leads, if not more. Just continue the emphasis on quality of service.
Invest in your vision.
We’re not trying to veer out from our main task, and main task is enterprise-level communications to small businesses. We’re not trying to bring them additional services. We’re not trying to be a generic cloud platform. We’re not trying to become a broadband provider or call center operator or any of those things. Many of our competitors might be going into those tangents under the belief that there is low-hanging fruit there, and maybe there is. But I believe in focusing.
It’s fairly rare to find a world-class football player who is also a world-class baseball player. People have tried. Most of them did not succeed at the other sport after owning one sport. I feel the same thing here. If you want to be really, really good at football, play football. If you want to be really, really good at business communications, do business communications. We’re at the size where if we are to retain our world championship status, we need to work really hard.
How to reach: RingCentral Inc., (888) 528-7464 or www.ringcentral.com
As the economy took a hit over the last few years, Fred Stock saw the demand for his organization’s services grow dramatically. That’s because the result of a down economy is more and more people seeking out more of the services that Jewish Community Services of South Florida has been providing for years. But keeping up with the higher demand has not been easy, especially when coupled with the funding challenges of operating as a not-for-profit entity.
“There’s an increased need corresponding with a reduction of available dollars,” says Stock, the president and CEO of the Miami-based social services agency, which services the Dade County community.
As fundraising in the overall community has dropped, so has the amount of funding dollars coming into the organization.
“So we need to figure out ways to cover the overhead for the agency,” Stock says. “One of the ways is that you reduce those costs by being more efficient.”
Stock says that this is a challenge many more not-for-profit organizations are dealing with today.
One way he says these agencies can manage costs is by providing a mix of free and paid services. By expanding in areas that have a “fee for service,” such as home care, the organization is able to cover costs of the services that it provides for free.
“We’re trying to expand our capabilities to provide services that can reimburse us for our costs, and we can generate some surpluses to pay for the programs that people don’t have the ability to pay for,” Stock says.
However, the crux of the agency’s strategy to become more efficient involves developing partnerships with organizations that share its service goals and funding model.
“We have definitely taken on the belief that in order to be successful, we need to partner,” Stock says.
“By combining, we can serve more people, create operational efficiencies, expand our reach, and it will allow us over the long haul to create more opportunity to serve people.”
While many smaller not-for-profit agencies are quality organizations, they are often limited in what they can do because they don’t have the infrastructure or funding sources to expand and grow. Leading a larger agency, Stock is now working harder to partner with smaller entities so both parties make progress on shared goals. An example is how the agency is partnering with assisted living facilities and HUD 202 housing projects where there are large constituencies of people who need its services.
Stock says you want try to align yourself with agencies and programs that relate to where you can provide services but also with agencies that have a similar mission.
“You maximize their capabilities and their expertise,” Stock says. “You bring that expertise now into this affiliated entity … and then you can expand your service capability because potentially that service can be located in a community that you’re not serving.”
The other advantage of partnering is the potential to combine operations or share resources where appropriate, which can increase efficiencies for both parties. So if two entities are doing billing with a number of grants, there is an opportunity to combine that billing for cost savings.
Stock says constantly monitoring and improving efficiency is something that not-for-profits and businesses should be doing whether or not there are funding issues. By partnering up, the agency continues to find strategic ways to carry out its mission and deliver its services more efficiently.
“We’re a $15 million agency,” Stock says. “We can bring some of that infrastructure — the funding, the marketing, to that new agency and enhance that agency’s effort to create revenue. And then you can create revenue for a larger organization and you have a whole lot more clout, because you have a whole lot more reach. You’re serving more people. In that process, you can find savings within that entity that you can then put back into your programs to yet provide more services.”
Many not-for-profit entities have faced funding challenges as a result of the economic recession. Jewish Community Services of South Florida, which provides its services at no cost, is funded primarily through grants and fundraising. But that funding is limited and most of the agency’s funding sources do not provide enough money for its administrative component. To maintain services as money becomes scarcer, president and CEO Fred Stock has led a number of initiatives to be more efficient in this area.
“We’ve had to become much more efficient in the way we provide services and in the way we fund our administrative component,” Stock says. “In an agency, you have direct services and then you have the infrastructure that you need in order to run these services, things like billing, rent, offices and all of that, which are fixed expenses to some degree.”
To increase efficiency in the administrative component, the agency has consolidated some of its offices and begun looking at ways to utilize space better. It’s also started to streamline processes in internal operations such as billing, maintenance and systems.
“We’ve been able to save a substantial amount of money in these areas that has allowed us to continue to provide services at the same rate,” Stock says. “So even through we’ve suffered from reductions in funding, we’ve been able to still maintain the levels of service that we’ve provided over the last few years.”
How to reach: Jewish Community Services of South Florida, (305) 576-6550 or www.jcsfl.org
When times are lean, eliminating excess and making do with less is simple common sense. That’s true for households as well as companies. However, the recent economic ups and downs have prompted some companies to cut so much fat that they have become too lean ? they suffer from what some call “corporate anorexia.”
Most Americans are all too familiar with anorexia, a physical and mental health condition that results in otherwise healthy individuals starving themselves. Despite the disorder’s pervasiveness in our culture, we rarely think about anorexia in relation to companies. It is, however, an appropriate description of companies that, perhaps due to managers’ fears of economic unknowns, get overly lean by cutting jobs.
Eliminating jobs, either through layoffs or attrition, is not in itself unhealthy. In a slow economy, it is often an unavoidable maneuver to reduce cost structures and operate more efficiently. However, when companies cut too deep or remain too lean for too long, they can experience languid performance and ultimately stagnate growth.
The damaging effects of corporate anorexia manifest themselves in a variety of ways:
Corporate anorexia can have an immediate and devastating effect on a company’s existing work force. When a company cuts back, remaining employees are often required to work additional hours or take on added tasks with little or no added pay. In a tight job market, employees are unlikely to complain, but over time, they are sure to feel increased stress and job dissatisfaction, and those overworked and underpaid employees will be quick to leave should an opportunity present itself. If you are suffering from corporate anorexia now, it will only get worse if those few key people decide to leave.
Even if an anorexic company manages to retain its best, most experienced people, how effective can they be? It is inevitable that when there is too much work, things fall through the cracks. Ultimately, product and service quality, along with customer responsiveness, can suffer. The potential for lost business is obvious.
When a business is “lean and mean,” it is thought to be quick, agile and responsive to market movements. But being too lean can have the opposite effect. When a company is too lean, it does not have the energy (in the form of “manpower”) needed to respond to opportunities quickly. As a result, the anorexic company misses opportunities for new business and potential growth.
Almost all of us binge now and then. We allow ourselves to eat a little more on vacation or over the holidays, knowing we can cut back later to lose the added weight. As individuals, it is relatively easy to change course, but it is not so easy for companies. Just as it takes time to cut back, it takes time to staff up again. Managers can’t decide to staff up for a project one day and have qualified people on site ready to work the following day. They have to recruit and hire the right people, and then those people need time to be trained and get up to speed. When companies become too lean, proactive recruiting efforts are a positive step in the right direction, but the benefits can be months or even years away.
With so much negativity surrounding the current economy, it is natural for managers to think about getting lean. It is smarter, however, for managers to plan wisely so their companies remain healthy in spite of the economy.
John Allen is president and COO of G&A Partners, a Texas-based HR and Administrative Services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com.
Do you know who actually buys from you? I’m talking about the socioeconomic makeup of your best customers. Is it women 35 to 45 years old with an income of $60,000 that spend, on average, $200 on every purchase? Is it businesses with 10 employees or less? If you don’t know, it’s high time you found out. After all, you can’t clone your best customers until you know who they are.
Take the following steps to construct a model of your ideal customer:
1. Accumulate all the details of your sales for either the past six months or one year (it’s not necessary to exceed a year).
2. Add up the total gross income (GI) of each sale and divide that number by the total number of sales. This will give you your average ticket price. Example: 200 sales with total GI of $200,000 means your average ticket price is $1,000.
3. Take the top 10 percent of your invoices (based on sale price) and list all attributes you know about them. If you are targeting consumers, this should include gender, age, income, location and whether or not they have kids or own a home. If you are targeting businesses, this should include industry, number of employees, annual revenue and the title of the person at the company who worked with you.
Once you have the model of your ideal customer, you can begin to take steps to acquire more customers that are like them. If you don’t know some of the answers to the above, you can actually buy data and append it to your list.
I have found direct mail to be the most successful lead generation tool for my marketing, especially for acquiring specific customers. The reason is that you can get extremely specific with mailing lists and tailor your mail piece to that specific demographic for a higher response rate.
For example, at PostcardMania we mail to small business owners. We discovered from reviewing our invoices that dentists make up a whopping 20 percent of our revenue, so we pulled out all the data we could about our dental clients and by appending information, found that the bulk of them (not all of them) were the dentists with newer practices. So we targeted those newer practices and saw an increase in calls in, closes, and of course, overall revenue generated from that industry.
Say your target demographic, or ideal customer, is wealthy men in their 50s. You can simply get a mailing list of every man in your area whose age is between 50 and 59 with a household income of $300,000 or more. You could also further specify by home or car value, marital status, number of children and so on.
Not only does this list ensure you reach everyone in your potential ideal market, it also pulls great results. Since you know exactly who it is you are mailing to, you design a postcard (better than letters, no envelope to open) with copy and images sure to get their attention, rather than appealing to everyone. The more you hone in on the “button” that resonates with your audience, the higher your response rate (and conversion rate if your salespeople do their jobs) goes.
This is a simple strategy to target the customers you want to replicate by identifying your ideal customer, getting a mailing list of all the people that fit that model and mailing out marketing material that uses a message especially tailored message to them. For best results, continue to communicate this message over time. It takes an average of seven marketing touches for a prospect to respond to your message. So the more often they see it, the more likely they are to respond.
Joy Gendusa founded PostcardMania in 1998 with a phone, computer and no capital investment. Since then, she has grown the company into one of the nation’s most effective direct mail marketing firms, specializing in postcard marketing for small to large-sized businesses. Over the years, she expanded to offer mailing list acquisition, website development, email marketing ? all while continuing to educate clients with free marketing advice. She has been named Tampa Bay CEO of the Year, Business Woman of the Year in Tampa Bay and has been featured on MSNBC’s “Your Business.” PostcardMania is an Inc. 500 and 5000 company and has won awards for creativity, best business practices and leadership. Learn more at www.postcardmania.com.
Britt Massing realized that his company needed to get creative if it was going to weather the turbulent economy in 2009.
“We could see that a lot of clients, instead of having four or five or maybe 10 orders a month, were going to one, two or three orders a month and constantly saying, ‘We might be having layoffs,’ or, ‘We’re trying to maintain our costs and cut costs etc. at this point in time,’” says Massing, president of The Staffing Resource Group Inc., which employs 93 contractors and a staff of 11. “That’s what we had to deal with.”
Today, the staffing company is one of the fastest-growing businesses in the Tampa Bay area. Smart Business spoke with Massing about how to use economic uncertainty as an opportunity to grow your business by better serving your clients’ needs.
What is the first step when you realize that your clients are struggling?
I think that a lot of companies didn’t react quickly enough to making changes. They thought maybe that renegotiating might not be the best thing for them. A lot of them also didn’t think about going back to as grassroots as taking a look at the income and the profit and loss report and thinking look at all the vendors and going back and talking with them.
The first thing we knew was that a lot of our competitors were going to be going out of business, and for us, it was if we make it through this, we’re going to be good. So what we did was we renegotiated with a lot of our clients our terms, and we also then renegotiated with almost all of our vendors.
We did one-year contracts where we’ve reduced our rates some. We were flexible when other companies were not flexible. We’ve listened to what our clients needed and if it worked for us from a business standpoint, we renegotiated until the turnaround started to happen for us. That was a big part of how we survived when a lot of other companies did not.
How do you stay aware of how to meet your clients’ needs?
We were asking our clients what they needed. Some clients, because of the technical aspect of our business, weren’t hurt as much as other clients, but the ones that were having some difficulties and asked us about flexibility, we decided what made good business sense and we ran with it.
Outside of that kind of strategic aspect, instead of not calling clients when they didn’t have needs at that time, we’ve maintained our relationships with everyone throughout that period. People would be like ‘You know you don’t need to stop by and say hello to us right now. We don’t have anything for you.’ Our response always was, ‘Well, we know you will in the future and when you do, we want you to remember us.’ We wanted them to know that we treat all of our clients like it’s a relationship and it’s a partnership. So we spent a lot of time staying in front of them. We’re in direct contact either via phone, e-mail, in person, breakfast, lunch, dinner etc., with our clients every week. We have a very grassroots effort to make sure that we’re constantly in touch and in front of all of our clients.
As the contracts had ended and then needed to be renegotiated, depending on how the companies were doing, we had opportunities to renegotiate our prices back to where they were or above where they were before; we’ve been able to do that as each contract has come up. A lot of them were experiencing the same thing that they had to do for their businesses as well. Many of the people that understood and partnered with us were going through it themselves, and for the most part, were very appreciative of what we did to help people get through those times.
What advice would have in employing this kind of strategy?
Don’t be afraid to ask for help. … We [the owners] are always constantly in communication and talking and bouncing ideas off of each other and taking that to the team. When the team is involved in any policy changes or any changes with the company, it gives them ownership of it and they take pride in seeing it through and making it happen.
We knew that we had to maintain the relationships because we work with what we feel is a great book of business and when we got with our team, we told them, ‘Every customer that we have will continue to get the same amount of service as they’ve gotten before and that’s what will happen in 2010 and beyond after we get through 2009.’
How to reach: The Staffing Resource Group Inc., www.srg-us.com or (877) 774-7742
The United States economy has evolved into a service economy. Yet despite the proliferation of service firms, organizational marketing and sales tactics are still oriented toward product-based organizations. Selling a service is much more difficult than selling a product because services are far more intangible than products. Our challenge as service providers is to understand how to sell our services as products.
For service firms, words like customizable, knowledgeable and flexible solutions abound. But what does that mean? What are we customizing or making more flexible? How do we sell that concept in our market? How do we communicate and sell that concept within our organizations? How do you measure success against knowledgeable and flexible solutions?
One answer is to make our services tangible by thinking of them as products. We can start by building a standard product capabilities outline. This outline forces us to examine the services we provide in comparison to what our customers say they need. It also requires us to analyze the manner in which we provide our services.
As service providers, we need to take a close look at what we do for our clients and provide a tangible, repeatable response to their needs. The first step is to effectively define your client’s needs in terms of the nature of their work and the underlying issues they need to address. To address the nature of the work, you need to be able to articulate first at a high level what kind of work needs to be done.
The second part is more challenging. To understand client’s motivators, you need to determine what they would struggle with if they didn’t have you. Would they struggle with expertise or timing? Would they miss out on important growth opportunities or experience cost overruns? Once you understand what motivates them to seek your services, you can begin to productize their needs. As an example, my firm provides professional biomedical and clinical research support services to the government. When we examined what our clients really “needed,” we realized that it wasn’t as easy as providing people to perform research. Our government clients “needed” minimal downtime. In essence, the government wants us to provide and retain qualified research personnel in a timely manner. They also want minimal distractions to occur during the course of the research, which means we need to ensure services are not interrupted due to personnel issues, equipment failures, or lack of communication within our organization. Understanding our clients “need” (in this case, minimal downtime) has helped us to focus on the critical aspects of what and how we sell our services to them.
Once you have the overarching need defined, you’ll want to convince your customer why you are a better choice than your competition. This is where terms like flexible and customizable play a role. Your firm’s strength is in how you deliver your service. It is important to show the client that you have repeatable processes that generate positive results.
The final step involves setting yourselves apart from your competition. Once you have a tangible solution developed, it is much easier to illustrate exactly how your firm is different and better because it will be grounded in tangible statements that apply to your client’s business.
Victoria Tifft is founder and CEO of Clinical Research Management, a full-service contract research organization that offers early- to late-stage clinical research services to the biotechnology and pharmaceutical industries. She can be reached at email@example.com. Clinical Research Management’s director of business development, Lori Gipp, assisted in the writing of this article.
One day, Derek Glanvill was part of a construction industry that was achieving record growth. Seemingly the next day, the sector was caught in a downward spiral that appeared to have no bottom.
“Our industry doesn’t have 9 percent unemployment,” says Glanvill, president and COO at McCarthy Building Cos. Inc. “It has 20 to 23 percent unemployment in the construction trade. From 2006 to 2007, the construction economy was at its highest that it had been in any of our lifetimes. The fact that we’re now in a very different economy, it’s the contrast of that high to this low that is so stark and amazing.”
The recession was quite the game-changer in the real estate market as the country went from a building boom where new homes and businesses were being built on every street to an environment where every neighborhood was being overwhelmed with property foreclosures.
It left many business leaders trying to plot just when this economic plunge would reach its bottom. Glanvill wasn’t interested in being a prognosticator.
“You don’t predict it,” Glanvill says. “You do everything you can to right-size your company. You look at your cost structure. You make sure you get rid of any excess costs. You stop doing things that don’t add value. You take a strong look at your company and you prepare to operate it for as long as it takes in that environment.”
Glanvill preaches strategic thinking at every level of the 1,500-employee company. He wants his employees thinking every day about how they can do their jobs more effectively. By doing so, he’s confident that McCarthy will always be in a strong position, whether the economy is heading up or going down.
His approach has helped McCarthy weather the storm pretty effectively. The employee-owned company had more $2 billion in revenue before the recession hit and it still does, with $2.5 billion recorded for 2010.
Here’s how Glanvill makes strategic thinking a priority and keeps McCarthy poised for whatever the future might bring.
Make it routine
Glanvill didn’t want his employees to feel any differently as they strategized during the recession compared to when they met during the boom times. Strategic thinking should not be a big event at your company. If it is, Glanvill says you’re not doing it enough.
“You can’t just show up one day and say, ‘Let’s be strategic today,’ and have it be the first time you ever thought about it,” Glanvill says. “How do you get them to show up on a Friday afternoon and put their creativity hat on? Now all of a sudden, they are being forced to think completely differently than what they’ve been trained to do and wired to do. That’s a challenge for any organization to suddenly expect people to switch from one mindset to another.
“The answer is creating that expectation that even though I’m doing my day-to-day job and I’m working my way through it, I’m doing so in a way that constantly requires me to be planning.”
If you make strategy and planning a part of everyone’s job responsibility from day one, it’s not viewed as a burden. It’s just part of what they do. It’s a little different at McCarthy because it’s an employee-owned company. But Glanvill says the principles work just as well in any type of business.
“The key to doing it is to get people talking about it and empower them to come up with ideas and then be ready to implement them,” Glanvill says. “One thing that will infuriate your employees is if you ask them their opinion and then you don’t do anything about it. You need to report back on results.”
The accountability must work both ways. As important as it is for you to respond to ideas, you need to impress upon your people the importance of bringing ideas to you for consideration.
“Every employee is expected to come with a way of strategic thinking, not only when we put the plan together, but all the way through it,” Glanvill says. “We’re always in the middle of executing an existing plan or inventing a new plan. It’s cultural. You build that expectation into peoples’ minds. It’s not a static approach where you just ask for ideas.
“Planning underscores everything. We plan for safety, quality, profit, client relationships, everything we do around here. It’s that idea that every project we do has a margin plan, a site-specific quality plan and a site-specific safety plan. The idea of planning is a core part of what we do. It becomes not automatic, but it becomes something they are used to doing.”
Create an environment where everyone is thinking, ‘What could I be doing to help the company improve?’ and you’ll get ideas like the solar project McCarthy has launched in the southwestern United States.
“It came from an indepth study on renewable energy that two of our operating groups got together and did,” Glanvill says. “They said, ‘Let’s go ahead and take a look at that.’ Nobody asked them to do that. They did that on their own. Their leaders of their divisions did it because in their businesses and because of the tough geographical markets they are in, they could use it as a way to change their business.”
It will take some time to implement strategic thinking in a company that hasn’t really focused on it, but Glanvill says that’s OK.
“I still keep asking myself, ‘Does this add value or not? Does this have a good outcome? If I do these things, what’s going to happen?’” Glanvill says. “If I have a good plan, I can assess the risks and opportunities within that plan. Even though it appears to be a day-to-day grind, it sets the mindset of everybody incrementally improving.
“Take 1,500 people and incrementally improve them while they are doing their day job, it makes a strategic leap. It makes the creative planning meeting they have to go to a whole lot easier. Create some strategic examples of how things could be done differently. Oftentimes, if you give people a couple ideas and start them in the direction and you challenge them with some key questions, they tend to want to roll up their sleeves and solve it.”
Set high expectations
It’s not too tough to sit in a room and throw a bunch of ideas up on the board of what you could do. But if those ideas don’t ever go anywhere, what was the point? Glanvill wants employees to know that they need to do their homework when they’re thinking about ways to help the company.
“You have to have somewhat of a formal approach where there are certain areas of questioning and answers that need to be provided with each idea,” Glanvill says. “It’s by making people go through the legwork of a formal process of filling out a couple pages of written information that forces them to really flesh out the idea. You’re not making it too bureaucratic where they feel like it’s burdensome. But you have to force people to think. Great ideas are wonderful. But if you can’t articulate how they are going to apply to the business or you can’t measure the value, they aren’t great ideas. They might sound good, but you have to have a real formal way of accepting and vetting.”
When someone on your team has clearly put in the effort, recognize him or her for it, even if it’s not something you can act on at that moment.
“I had a young gentleman present a white paper on why we weren’t doing more business in India,” Glanvill says. “I commend him a lot for coming forward and having a lot of great ideas and doing the research. The right approach is to sit down and listen to him, even if you know it’s an idea that’s not going to fly. Sit down and listen to him and make sure he feels like he’s been heard.”
If you show through your actions that you’re holding people accountable to come up with solutions and not just ideas, the quality of those ideas will improve.
“When the idea is vetted and is brought forward and challenged, the employee knows they need to bring not just the idea, but a certain level of solution. By allowing them to be part of it, it’s absolutely key to setting the stage where people believe if they do come up with an idea, someone is going to act on it.
“It’s a great idea to go to India, but we don’t have the people that want to go there. It’s a great idea, but we don’t have the resources. If anybody steps up and says, ‘I’ll do it,’ you have to be prepared to clear the path for them and allow them to do it.”
The vetting process is obviously key to sorting through ideas and moving the ones that can work on down the line. Glanvill relies on a panel of 10 leaders that he keeps in touch with on a regular basis. He wants to make sure they are doing their job fielding and discussing ways to improve the business.
“You have to spend a lot of time with your key leaders to know who is good at it and who is not,” Glanvill says. “The process you need to put in place is have a report-out process fairly often. If you’re going to lead a strategic initiative, you have to be accountable for it. It means you have to present the ideas that you’ve collected, present status and progress reports.”
If the people coordinating ideas aren’t meeting expectations, make changes.
“Sometimes we have changed the leaders because we’ve had those complaints,” Glanvill says. “You’re not engaged enough or you’re not listening enough. It’s being able to recognize those folks who are good at it and those who are not good at it.”
Glanvill preaches strategic thinking whether McCarthy is operating in a good economy or a bad one. But he does recognize that his people have other day-to-day responsibilities.
“You don’t want to be doing strategic planning 40 hours a week,” Glanvill says. “You don’t want your employees sitting there thinking that you’re asking them to be creative every minute of the day and you’re losing their core work. It always gets back to that planning culture and people knowing that when they do have a great idea, it will be heard and they will be able to participate in the right way.”
Glanvill keeps his eyes open so that when people are ready to take on more responsibility and fill the leadership roles needed to make things happen, it’s a fairly seamless process. He wants people to always be thinking about where they might in to the company’s future and then feel they have a path to get there.
“Strategic planning and leadership development go hand in hand because you need to have a talent management process that identifies who the top talent is,” Glanvill says. “They become the leading advocates for your strategic planning process. You get the right people identified, you get them on the right path, you empower them to become strategic, you empower the whole organization to become better at planning and with a little bit of formal process overlay, but not too much bureaucracy, you clear the way for people to do the things they are good at doing.”
You need to create a culture where people are always thinking about what the company might need in the future.
“We have a strong culture of everybody needing to name two people who could take their job,” Glanvill says. “So everybody in the organization is constantly trying to identify talent.”
When business units at McCarthy meet, they must bring in their organizational charts.
“It’s color coded in terms of people who are doing well and people who are emerging leaders and people who are ready for advancement,” Glanvill says. “We not only force them to do it on what today’s environment looks like, but we get them to show a future org chart three years from now and what it’s going to look like. Who are the potential candidates to fill those roles?”
Glanvill wants employees to be thinking strategically about both the business and about the personnel who will conduct that business and plot the direction of the company.
“You have a process that migrates talent in the organization and it creates opportunity,” Glanvill says. “Identification of the high-potential people that are in the funnel, you have it on a spreadsheet and you talk about it often. One of the columns that needs to be filled is, what is their next development step? Where are they going next?”
How to reach: McCarthy Building Companies Inc., (314) 968-3300 or www.mccarthy.com
The Glanvill File
Born: Johannesburg, South Africa
Education: Bachelor of science and master’s degree, civil and structural engineering, University of Natal (University of KwaZulu Natal), Durban, South Africa
What is the best advice you ever received?
Treat others the way you would like to be treated. Work very hard by setting the example. You set the tone; you set the work ethic. And then with a few other leadership qualities like listening and being able to make decisions, trust your partners to make good decisions.
Glanvill on leadership: The key to being a strong leader is to be able to articulate a good set of behavioral values and you have to be able to put them into action. There are certainly those who are born with natural leadership skills. But leadership can be taught and it can be learned. There are many people who have learned it who are not necessarily as effective as those who have natural skills. But I don’t think that all great leaders have natural skills.
Glanvill on the benefits of employee ownership: People are a whole lot more interested when it’s their company. I look at our ownership structure and I look at our culture, and you’ve got 1,500 people all incrementally trying to be 10, 15 or 20 percent better and owning their own development. You create that expectation in them. You can take another 1,500-man team that is publically traded, family owned, management owned, and we’d beat the socks off of them. Just by definition, we’ve empowered so many people to the outcome. The reward is personal because of accountability.
MorrisAnderson was a mess and it was largely going to be up to Daniel F. Dooley to fix the dysfunctional turnaround consulting firm.
“Historically, the firm had never had one clear leader,” Dooley says. “It was fractionalized into various geographical segments that didn’t collaborate with one another. A cynic would say they competed with one another.”
One of Dooley’s challenges was that while the then 25-employee firm was having problems, it was still profitable. So there wasn’t a lot of motivation to make big changes to a firm that many didn’t even think was broken.
“We hadn’t adapted to what was going on in our marketplace,” Dooley says. “The people we were competing with were much more professional and much more advanced in marketing and in their ability to convey what they did.”
Dooley needed to shake things up. So he led the way to removing three of the firm’s seven owners from power.
“We terminated two, and one we demoted, and he hung on for a couple years and then left of his own volition,” says Dooley, the firm’s principal and CEO. “We had to change out the management group to some degree and then the second thing we had to do was clearly unite behind one clear leader.”
Dooley was going to be that leader. And he was going to have to take drastic action to get everyone’s attention that change was needed. It wouldn’t work if he tried to tiptoe around the moves.
“The times people make really fundamental changes in their lives usually centers on a trauma,” Dooley says. “There has been something really bad that has happened. For example, a person who smokes cigarettes and they can’t stop. Perhaps when they have a heart attack and they almost die in the hospital and they have a quadruple bypass, maybe that’s when it becomes a little easier to quit smoking. They’ve had such a trauma, they have the ability to think things through and act a little differently.”
It was a major move. Dooley wanted people to know he was the leader, but he had to show it wasn’t just him ruling with an iron fist.
“We set up a board structure so I reported to a board and wasn’t a loose cannon doing what I wanted,” Dooley says.
With the board’s backing, Dooley went to work trying to create a culture that was more collaborative than competitive.
“I felt the best way to do that would be to take direct control of all the employees myself and to model collaborative behavior and to try to talk about it and preach and convince people that’s how we had to act,” Dooley says. “We had to work together and not against one another.”
There were some casualties as some didn’t like the new way things were being done. But Dooley needed to focus on those who were still in the fold and get them on board with his new vision.
“You can only work on a couple things at a time,” Dooley says. “One of the mistakes people make when they are in crisis or in trouble is they try to do too much too quickly. So they launch 25 initiatives. That ensures nothing will get done.”
So how do you get people to support you and buy into you with positive energy when you’re taking decisive action?
“You have to develop a strategy or a plan that is pretty realistic and not pie in the sky,” Dooley says. “It’s, ‘Yeah, we can do that. It makes sense we can do the following three, four or five things.’ Then you have to create some communication so people know what you’re trying to do and why you’re trying to do it so they can hopefully buy in or buy out of what you’re trying to do.”
Six years later, MorrisAnderson has 40 employees and reported 2010 revenue of $20 million. And while the tough call he made back in 2005 got the ball rolling on needed change, patience is still required.
“You have five or 10 or 15 years of history that you’re trying to overcome in two days,” Dooley says. “It’s kind of unlikely.”
How to reach: MorrisAnderson, (312) 254-0888 or www.morrisanderson.com
Answer the questions
Daniel F. Dooley has a lot of experience answering tough questions. He faced it in the remaking of MorrisAnderson and he faces it in the work that MorrisAnderson does as a turnaround consulting firm.
The key in both situations is not hiding from the questions that people have for you about what you’re doing.
“The more desperate you are or the more difficult the situation, the more you have to openly communicate with employees and give them the opportunity to hear what’s going on,” says Dooley, the 40-employee firm’s principal and CEO. “Try to craft a way that even though they are scared and nervous, they know they are getting the straight scoop from you.”
You do that by answering every question that comes your way with complete honesty.
“It’s more than just talking,” Dooley says. “You have to really listen to what they say. Those questions are important to them. Whether you think it’s important or not is irrelevant. If it’s important to them, it’s important.”
Inflation is coming. It drives your costs up and results in lower profit margins unless you raise prices. But customers hate price increases and they hate having to pay more.
How can your company increase prices and upset your customers the least? Here are six methods to explore.
1. Cut variable costs.
Is there a way to reduce the costs of your product without significantly affecting your customers’ perception of the product? This is extremely common in the packaged food industry. What used to be 28 ounces of Prego spaghetti sauce is now 26 ounces. A package of Rolos used to have 11 chocolate caramel chews. Now there are 10. What looks like a half-gallon (64 oz.) of Breyer’s ice cream is now 48 ounces. Customers quickly recognize price increases, but they are slower to recognize reductions in product quantity, especially when the size of the packaging remains the same.
Look for something that costs you money that you can de-bundle from the purchase. Customers who want the de-bundled feature will pay extra for it, and it allows you to maintain or lower prices for customers who don’t use the de-bundled feature. At the worst, you’ve only raised prices on some of your customers.
A recent example is how some airlines have de-bundled checked luggage so they now charge customers for checking bags. Although many people saw this as a price increase, it would have been more readily accepted by their customers had they announced they were simultaneously lowering the prices of their flights for people who don’t check bags.
3. Introduce new products.
It’s possible to create a new but similar product with a slightly different feature set. Charge more for the new product and attempt to move as many customers as possible to the new product. Of course, this also means you need to build some added value into the new product.
4. Raise fees.
When gas prices hit $4 per gallon, many companies added a fuel surcharge to their bill. This extra fee isn’t looked at as a price increase, but rather just a way of passing some cost increases through. Now, four years later, some vendors have not removed this fuel surcharge even through fuel prices are back to normal. Many customers do not consider fees when making purchase decisions, so raising fees is preferable to simply raising prices.
5. Raise prices on select segments.
You’ve considered the first four options and they don’t completely solve your pricing issue, so you have to raise prices. Consider only raising prices on select customers. First, look to raise prices on your least preferred customers, those you wouldn’t be too upset to lose. These could be the ones who are expensive to service or are just a pain to deal with. They could also be the ones who negotiated the best deals, so they may not even be profitable after your costs increase. Then look to increase prices on new customers. The advantage here is that new customers don’t recognize price increases. They only see the new price. Do your best to hold prices level for your best existing customers.
6. Raise prices with a purpose.
If you’ve come to the conclusion that you have no choice but to actually increase prices, at least blame inflation. Customers may become very angry if they believe you’re raising prices to increase your profit at their expense; however, they are more accepting if they believe you are simply passing on costs. Apologize to your customers for your price increase, but explain how your costs are going up and that you have no choice. Look and act contrite. Do something nice for them, such as giving them a limited time coupon for a discount to the old price.
Mark Stiving is a pricing expert with a Ph.D. in marketing from U.C. Berkeley and more than 15 years of experience helping companies implement value-based pricing strategies to increase profits. A speaker, coach and consultant, Stiving has worked with esteemed companies such as Cisco, Procter & Gamble, Grimes Aerospace, Rogers Corp., as well as many small businesses and entrepreneurial ventures. Read more from Stiving on his blog at www.PragmaticPricing.com, and learn more at www.markstiving.com.